A decline in worker efficiency for the first time in 18 months is really good news for the struggling United States economy and high unemployment rate. By getting more output from fewer workers, businesses that laid off workers during the recession have been increasing their earnings. But the latest round of worker productivity statistics from the Labor Department shows that staffs are stretched too thin. If that is the case, United States companies will have to engage in job creation to maintain growth and boost the flagging economic recovery.
A new meaning for falling worker productivity
After posting large gains in 2009, the Labor Department said that worker productiveness declined at an annual rate of .9 percent within the second quarter. Worker productiveness is a primary factor in improving the standard of living, as outlined by the Associated Press. The increased production resulting from higher productiveness allows companies to increase wages without increasing prices . In most cases a slip in productivity would be a troubling sign for the U.S. economy. Nevertheless, numerous economists think that high unemployment rate will eventually hurt corporations that have prospered by laying off workers. Because consumer spending accounts for 70 percent of the economy, hiring will create the jobs families have to go shopping. Those businesses benefit from more demand for their products.
Businesses push workers to the limit
For companies banking that output would continue to climb without hiring new workers, CNN reports that the new Labor Department report is a wake-up call. During the worst of the recession, and businesses learned how to get more with less. However, the amount of hours worked rose faster than output within the Labor Department report. Nariman Behravesh of IHS Global Insight in Lexington, Mass., told CNN that businesses probably “overdid it” with layoffs during the recession. Even if it’s just to keep employee morale up, he said, corporations may have to hire more to stay away from burning out workers.
Job creation needed to thwart deflation
Beharvesh told CNN that within the next few months, job creation will likely remain weak. He expressed longer-term optimism, however, saying the private sector could start adding 100,000 jobs a month by year-end and perhaps 150,000 by mid-2011. A report from ABC news disagrees, saying that weak efficiency, along with other indicators, shows that the economic recovery is losing steam. In the April through June period, economic growth was measured at just a 2.4 percent annual rate, down significantly from 3.7 percent from Jan. through March. with the unemployment rate mired at 9.5 percent, officials at the Federal Reserve are concerned that companies will see the high unemployment rate as an possibility to push wages down for many who nevertheless have jobs, which could start a debilitating cycle of deflation.
google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0
CNN
money.cnn.com/2010/08/10/markets/thebuzz/
ABC News
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